November 19, 2012

California taxpayers... averaged $33,901 in deductions, in part because they claimed the U.S.'s highest average mortgage break, $15,755.

After California, the highest average itemized deductions—all over $28,000—were claimed by taxpayers in New York, the District of Columbia, Connecticut, New Jersey, Maryland and Massachusetts. All have high state, local and property taxes, which may be deducted from income on federal returns, although other tax provisions already limit some deductions.

Does this make the limiting of deductions less fair than raising tax rates? Don't the same people who have those big deductions also have higher incomes? Aren't these places where everything is more expensive? It's perverse that these are the blue states, and it's the Democrats who want to raise taxes.

Capping the deduction of state and local taxes will make the taxpayer turn his attention onto the high levels of state and local spending. That will put the state and local pols on the spot. So capping deductions is a good thing.

Democrats believe in taxes. They should pay them. And the republicans should up the ante and propose to eliminate the tax excemption for municipal and state bond's interest income and tax foundations and non-profit's on their investment income along with require them to pay property and other local and state taxes or lose their charitable tax status. No more free riders.

"Does this make the limiting of deductions less fair than raising tax rates? Don't the same people who have those big deductions also have higher incomes? Aren't these places where everything is more expensive? It's perverse that these are the blue states, and it's the Democrats who want to raise taxes."

In a word or two, "fuck 'em."

The assholes want expansive, expensive government to run all our lives and steal property to redistribute wealth?

And speaking of foundations they should no longer be allowed to charge their overhead to their required annual 15% distribution and all tax credits other than those allowed by tax treaties be abolished. Since according to the proponents of big government and entitlement spending everyone benefits from government spending everyone should pay them.

I think it's unclear exactly how this would work without understanding the impact of the AMT. So here's a simplistic question with slightly unrealistic numbers:

Suppose someone does their taxes the normal way and comes up with a federal tax bill of, say, $200,0000. They then get hit by the AMT and pay, say, $225,000.

Now, if the Bush tax cuts expire (and nothing else changes)what happens? Would they do their taxes the normal way and with a higher marginal rate have a bill of, say, $240,000 (with the AMT still at $225,000 and therefore irrelevant); or would the AMT also go up to, say, $250,000?

To put it another way,would people who did not get the full benefit of the Bush tax cuts because of the AMT not get hit with the full impact of the Bush tax cuts expiring? And if so, then these people never really had the full benefit of their tax deductions and would not be hit hard by a reduction in these deductions.

Big government and big spending is only popular as long as one doesn't have to pay full freight. Eliminate all deductions other than the standard deduction and tax benefits as income. Everyone benefits and therefore everyone should pay. Once these reforms are in place lets see how popular big government and big government spending really is.

While we're talking about how screwed up CA is, did you know that the last time CA's unemployment was lower than the national average, Barack Obama had just been elected President...of the Harvard Law Review. Bush had not invaded Iraq-Bush the Elder, that is. CA has the longest streak og any state of above average unemployment-longer than Michigan, or even DC. This state hates workers.

I think my surtax on all public employees municipal, state , and federal is a fair one. If they are going to lobby to raise taxes then they should have some skin in the game. I think 5% on those employees making less than 100,000 dollars is fair, and 10% on everyone making more than that is fair as well.

Another tax I think is fair is a tax of one cent a word on all legislation. The tax to be borne by those who propose said legislation.

Rather than eliminate any particular deduction, just cap the total itemized deductions at some amount (say $50,000) and cap tax credits at some amount (say $10,000). Taxpayers can allocate among that various deductions to include home mortgage, state income taxes, property taxes, charitable contributions, etc. but cannot exceed $50,000 total. This will minimize the power of the rent-seekers who lobby for the continuance of their deduction and force them to compete with other rent-seekers for the limited itemized deduction dollars. High-tax blue staters might force refrom of state and local taxes if they cannot deduct the full boat of high state & local income taxes, real estate taxes, and home mortgage interest.

Also, get employers out of the health insurance racket to eliminate the untaxed health insurance benefit as part of compensation. This has encouraged overconsupmtion and, together with the lack of incentive to use less care and use more efficient providers, resulted in excessive prices for health care. Employer-sponsored health insurance is another $15-$25,000 deduction from what would otherwise be taxable income. Forcing people to recognize this as taxable would encourage people to seek less costly care.

There's one question I ask Democrats. It's a three-parter. Part 1 is how many wage earners does it take to support one person on Social Security? Part 2 is how many tax payers does it take to support one person on welfare. Part 3 is how many tax payers does it take to support one government worker.

Mostly they don't get it. Yet the numbers are real, and the equations don't have any sympathy, so we are headed for a crash unless a few key Democrats start acting like responsible adults.

In the Democrat world, forcing a company like Hostess to close is considered a victory for the union forces that all lost their jobs as a result.

For reasons that evade me, wealth reduction is now chic and desireable. If you get rid of the mortgage interest and property tax deductions, not only would CA and NY blue staters pay more federal taxes, but their home values would also likely trail in appreciation as a result. Apparently win-win for them.

"I also like the idea of businesses getting out of the health-care benefit business. Give the extra money to your employee and let them do the work themselves."

That would mostly solve the conflict over Mr. Obama's contraception mandate, as employers would no longer be in any way complicit in what their employees' purchase in their health plans. The problem of Mr. Obama coercing the policy-holders themselves would remain, however.

Also, the stupid GOP doesn't help it's cause when it destroys whatever credibility it has left. The GOP used to be the party of smaller government and less spending, as well as lower taxes. The stupid Republicans have lost credibility on the first two, if they vote for this, they lose the third.

Hey, but they can always blame the pro-lifers and the Tea Party! Look, a squirrel!

3) Estate tax 100% on any amount over $1 million, including life insurance, annuity and pension beneficiaries;

4) Tax as income any amount paid by an employer for health care coverage over the amount of the average policy available in the taxpayer's state exchange, no exclusions, i.e., public and private union employees aren't excluded;

5) No income caps for SS and Medicare taxes;

6) Means test all SS and Medicare beneficiaries, sliding scale phase out of benefits to 0% at 200% of average retiree annual income;

3) Estate tax 100% on any amount over $1 million, including life insurance, annuity and pension beneficiaries;

Goodby to family farms and family owned businesses.

I concur on the health insurance issue. Either tax the employee for the value of premiums paid, generally 15 to 20K a year, as income received or just give them more income and make them buy their own insurance. Either way, people will suddenly decide that maybe that ultra rich cadillac insurance plan isn't needed after all. People will stop over using medical services and the costs will come down for most ordinary procedures.

MadisonMan a few electin cycles ago, Steve Forbes pushed the idea of of a per person standard deduction and a flat tax above that. Probably easier to sell than a lower flat tax rate with no deductions. Forbes didn't get any traction as a candidate because he was about as un-telegenic as he could possibly be. And an evil capitalist to boot.

General comment - I like just about all proposals made here, like'em a lot. Especially the ones that give the Blue States voters what they deserve, good and hard.

@Dust Bunny QueenAs a business owner and about as small as can be, I choose my insurance coverage plan every year. I have learned my lesson - from personal experience - that the Cadillac plan is the cheapest, in my state at least. It simply shouldn't be that way. I certainly don't see ACA fixing it either - ACA is probably more like throwing a boat anchor to a drowning man.

Right. No doubt there's lots of unintended consequences in my list. Some of which, of course, could be reduced by writing in exemptions for small businesses and family farms under certain asset values.

But the real point of this little exercise is, the stupid rich who voted for this jerk to limit my freedoms, increase my taxes and share of the debt for my grandchildren, children and me should be made to bill the bill.

I think the Obama camp has already war-gamed a recession in 2013, and they are already preparing their next blame game.

On tax increases, the GOP should give Obama exactly what he asked for in the campaign. And let Obama determine the size of the cuts in spending needed. Otherwise, with the help of the media the Obama blame game will continue.

Gays Mills in Wisconsin famously moved because of persistent Kickapoo River flooding. I think another Wisconsin town has also done this. Yet coastal communities continually rebuild so the rich can watch dolphins swim by.

But "the whole country suffers as a result" is a dead-bang, 100% certainty already.

The debt is unsustainable.

Current spending is unsustainable.

There is no avoiding that.

So let's start with those who voted for Obama. Republicans could, conceptually, get behind those taxes in exchange for serious, structural reforms to the social welfare entitlement programs.

Instead, we'll get sequestration.

Anyway, as for Republican credibility, it strains credibility to think that the disaffected, limited government voters supported Obama because they were outraged by Republican intransigence on limited government.

I agree, people are stupid, but not that stupid.

And, although I'm pro-life and anti-gay marriage for spiritual reasons, I think you discount the effect those issues have in driving voters away from the Republican Party.

The culture has change, and unless and until it changes back again, those are losing issues for the Republicans.

This is why the deduction limitation idea will not fly. Think Illinois, New York, New Jersey, Connecticut, Massachusetts, Washington, Wisconsin, Minnesota in addition to California. All high property tax states.

Also mostly high income tax states. Deductibility of state income taxes presents the same problem. (It also presents an opportunity. They could actually eliminate some of the already existing limitations on income tax deductibility for high income persons--most crucially the AMT.)

The whole thing will be gamed big time. The system is complex enough that it can hide all sorts of gifts to the evil rich from the blue states.

Also, the stupid GOP doesn't help it's cause when it destroys whatever credibility it has left. The GOP used to be the party of smaller government and less spending, as well as lower taxes. The stupid Republicans have lost credibility on the first two, if they vote for this, they lose the third.

Sometimes the lessons that impart the most wisdom are the ones that hurt the most. Maybe its a good thing that CA is totally in the hands of the democrats. We get to see the effects of these policies first hand, with noone able to blame anyone but democrats.

Remember when Moses brought down the Ten Commandments, and the populace would rather worship the golden calf? Sometimes the best lesson is to let people get what they want.

Talking about rates absent a knowledge of their interaction with exemptions and deductions is a close to meaningless exercise. On the other hand, it does have its demogogic uses. And high marginal rates do create the political opportunity to grant or withhold the above mentioned exemptions and deductions to friends and foes respectively.

That's why the flat tax in its simplest forms is so attractive to the common citizen, while at the same time will never stand a chance of being put into effect.

Romney's plan was to LOWER marginal rates and eliminate certain deductions. Lowering the marginal rate is key because it encourages people to work and earn more. When you earn an extra dollar at the lower marginal rate, you get to keep more of it. Lowering the rate would promote economic growth, which in turn raises government revenue and improves the well being of citizens. Unfortunately, now it won't happen...

That said, there's no question the burden of eliminating the mortgage or state tax deductions will not fall equally. It's no coincidence payers in high cost blue states get hit harder. For many of us, that's a feature, not a bug. You get the government you deserve, I suppose. Given the explanation above it also explains Obama's obsession with raising marginal rates, and not with strategies to improve economic growth...

FR Martin Fox wrote:Also, the stupid GOP doesn't help it's cause when it destroys whatever credibility it has left. The GOP used to be the party of smaller government and less spending, as well as lower taxes. The stupid Republicans have lost credibility on the first two, if they vote for this, they lose the third.

LIbertarians who supposedly want limited govt voted libertarian despite knowing that if Romney doesn't win that they'll get bigger govt and Obamanomics. So if they're not voting for their interests F them.ANd as Bill Kristol said, maybe it is time to raise taxes. Why defend these big companies half of whom voted for Obama anyway? Hollywood could use some taxes. They get to live in fantasy world living like Litle Lord Fauntelroy's but keep talking about the fat cats who aren't paying their fair share. And demagoging businesses while speaking the populist cal. (like with Rosanne Barre saying “I first would allow the guilty bankers to pay, you know, the ability to pay back anything over $100 million [of] personal wealth because I believe in a maximum wage of $100 million. And if they are unable to live on that amount of that amount then they should, you know, go to the reeducation camps and if that doesn’t help, then being beheaded,” I wonder where she got that 100 million. My guess is its' because she doesn't quite make 100 million and wants to keep her shit. It's those that are richer than HER that are the villains. Last I heard 100 million salary still puts you in at the 1% range. Why not find what Rosanne earned last year and say 5 million lesss than that is the maximum salary that we believe peopel should earn and demand she pay that back or we chop off her head?

I'm really starting to see Instapundit's points about taxing Hollywood.

That said, there's no question the burden of eliminating the mortgage or state tax deductions will not fall equally. It's no coincidence payers in high cost blue states get hit harder. For many of us, that's a feature, not a bug.

This is why the deduction limitation idea will not fly. Think Illinois, New York, New Jersey, Connecticut, Massachusetts, Washington, Wisconsin, Minnesota in addition to California. All high property tax states.

The only counter to this will be for right thinking citizens of each of those respective states, is to begin a state initiative/referendum process to limit property tax collection on a single sales use basis. Do away with yearly property taxes and see what happens. It's the only way to keep these evil government spenders in check.

Buy a house or a piece of property, then pay tax on it one time like any other piece of property. Treat it like a TV, a candy bar, a car, whatever. Pay a one time tax. That should happen.

Just let the evil Bush tax cuts expire. Presidents Obama and Clinton made the argument during the election that the Bush econ policy and tax cuts caused all our problems, let them expire, Obama won. It will turbocharge the economy, let the Democrats put their money where their mouths are,fuck they've been whining about them for twelve years. FORWARD!

He started pushing for limiting deductions from early in his presidency (remember the argument that charities would get fewer contributions?). I know he argued it was "unfair" for someone making more money to be able to take the deduction at a higher rate (because they are paying a higher rate). This was how he was going to pay for his health-care slush fund.

Anyway, he hasn't talked about this in a while, just as he hasn't talked about fundamentally rebuilding America or taking the pill rather than getting the heart transplant.But I think that's the way he still sees the country.

So I look for him to push for increased rates now, then push for decreased deductions later.

The real target with limiting deductions is, IMO, charitable deductions. Kill the churches by killing their funding. Once the charitable deduction is gone, all charity will come from government . When all charity comes from government, then . . .

The real target with limiting deductions is, IMO, charitable deductions. Kill the churches by killing their funding. Once the charitable deduction is gone, all charity will come from government . When all charity comes from government, then . . .

Eliminating a mortgage deduction would probably end up bringing in less revenue, not more.

Right now, people bought their homes with the expectation of the mortgage deduction built into the purchase price. Without the deduction, sellers will not be able to justify higher prices. Home values will plummet. With lower values come lower property taxes. With lower values come more mortgages underwater, consequently with more foreclosures.

And those who cannot deduct mortgage interest now will not have the money to spend that deduction on other things which provide jobs for other people.

Alex--they will give if they can afford it. Churches are full of mid and low income people who give what they can. If taxes are raised, these people will have less money to give to the church or charity. I think that there is a big difference between faith based charity and government charity and I think that liberals want to get rid of faith based charity becasue of that difference.